Correlation Between Darden Restaurants and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Darden Restaurants and Cardinal Health at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Darden Restaurants and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darden Restaurants and Cardinal Health, you can compare the effects of market volatilities on Darden Restaurants and Cardinal Health and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Darden Restaurants with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darden Restaurants and Cardinal Health.
Diversification Opportunities for Darden Restaurants and Cardinal Health
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darden and Cardinal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Darden Restaurants and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Darden Restaurants is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Darden Restaurants are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Darden Restaurants i.e., Darden Restaurants and Cardinal Health go up and down completely randomly.
Pair Corralation between Darden Restaurants and Cardinal Health
Assuming the 90 days trading horizon Darden Restaurants is expected to generate 0.9 times more return on investment than Cardinal Health. However, Darden Restaurants is 1.11 times less risky than Cardinal Health. It trades about 0.3 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.22 per unit of risk. If you would invest 18,564 in Darden Restaurants on November 5, 2024 and sell it today you would earn a total of 988.00 from holding Darden Restaurants or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Darden Restaurants vs. Cardinal Health
Performance |
| Timeline |
| Darden Restaurants |
| Cardinal Health |
Darden Restaurants and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darden Restaurants and Cardinal Health
The main advantage of trading using opposite Darden Restaurants and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darden Restaurants position performs unexpectedly, Cardinal Health can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cardinal Health will offset losses from the drop in Cardinal Health's long position.| Darden Restaurants vs. Eastinco Mining Exploration | Darden Restaurants vs. Universal Display Corp | Darden Restaurants vs. Fortune Brands Home | Darden Restaurants vs. United Internet AG |
| Cardinal Health vs. Jacquet Metal Service | Cardinal Health vs. Adriatic Metals | Cardinal Health vs. Young Cos Brewery | Cardinal Health vs. Rheinmetall AG |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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